How Valley Water Can Reduce Rate Increases, Step 1: Listen to Your Own Experts

For more information, visit Solutions San José.

The Board of Directors for the Santa Clara Valley Water District (“Valley Water”) will vote on May 11th to increase wholesale drinking water rates by 9.6% this year — and will impose similar increases every year thereafter for the next decade, for a total 146% increase, ultimately borne by every residential ratepayer.¹

We urge belt-tightening solutions for Valley Water that will save all of us money, while still enabling sufficient water supply for our growing population. We don’t purport to have all of the solutions, but here’s one we’d like the Valley Water board of directors to consider: don’t spend $2.5 billion of public money on a water supply project that doesn’t add anything to our water supply.

We’ve listened to Valley Water’s staff, industry experts, and leading environmental organizations to better understand how Valley Water can mitigate its extraordinarily large proposed rate increases, which local retailers ultimately pass along to our residents. Based on our research, here’s an outline of what we think every ratepayer should know:

  1. Why Valley Water Plans to Increase Our Water Rates 146%
  2. Valley Water Acknowledges that the $2.5 Billion Pacheco Reservoir Project Will Neither Add to Our Water Supply, Nor Meaningfully Address Long-Term Water Scarcity
  3. Environmental Organizations Object to the Pacheco Project
  4. We Have More Affordable, Effective, and Sustainable Options for Expanding Our Water Supply

Here’s what we’ve learned:

1. Why Valley Water Plans to Increase Our Water Rates 146%

Valley Water’s published plans call for aggressive rate increases over the next decade — and there’s good reason to believe that these figures actually underestimate the actual increases to come:

Valley Water’s 10-year wholesale rate estimates for urban Santa Clara County (Zone W2)

Our public and private local water retailers, such as San Jose Water Company and the City of Sunnyvale, must pass these steep wholesale rate increases to all of us, their customers and ratepayers. For residents in the neighborhoods such as Evergreen and North San Jose served by the San Jose Municipal Water System, for example, the Valley Water rate hikes will account for about 60% of the rate increases they pay next year. The final year of Valley Water’s proposed wholesale rate increases is omitted from the chart above — but the agency’s published estimates call for a 2030–31 rate of $3,380 — a 146% increase from today.²

Why such steep increases? To be sure, ensuring a future of reliable and safe supply of water requires several important but expensive capital projects — such as the seismic retrofit of the Anderson Dam, which will cost $549 million in Valley Water’s ten-year capital budget.³ We should all pay for the costs of planning, designing, and constructing these important projects for our future if we all benefit from those improvements.

Dwarfing all of those capital projects in cost, though, is one: the proposed North Fork Pacheco Reservoir expansion. Comprising almost half of Valley Water’s $4.8 billion ten-year capital budget for water supply over the next decade.⁴ The proposed Pacheco project would expand a small reservoir along Pacheco Creek near Route 125 in South County from 6,000 to 140,000 acre-feet. Depending on the type of financing and funding that the agency can secure, the project will likely inflate the already-high wholesale rate increases, and we can expect those costs to grow as more environmental and geologic studies reveal the true costs of the project. In a short time, the cost estimate for the Pacheco project has already ballooned from $969 million in 2017 — when many cities and community organizations supported Valley Water’s application for state Proposition 1 funding — to more than $2.5 billion in year-of-expenditure dollars,⁵ and $3.8 billion if financing costs are included.⁶ As Valley Water Board Member Nai Hsieh, a civil engineer, warned, “the updated cost estimate will probably increase again.”⁷

Under optimistic assumptions, the Pacheco project will hike rate increases from 8.5% to 9.6% in this year, but the agency staff has acknowledged that the impacts could be far greater, telling its Board of Directors in April that the “Annual increase…in groundwater charge rates from 8.5% to 11 % to account for Pacheco Reservoir Expansion Project.”⁸ For example, if other nearby water districts do not absorb at least 20% of the cost of the project as co-investors — a highly likely scenario, given the excessively high $18,800 per acre-foot cost of the Pacheco project — Valley Water rates will increase further.⁹

2. Valley Water Staff Acknowledges that the $2.5 Billion Pacheco Reservoir Project Will Neither Add to Our Water Supply, Nor Meaningfully Address Our Water Scarcity

The prospect of spending $2.5 billion of public dollars on any project should force us to carefully scrutinize the extent and probability of the project’s purported benefits. To be sure, there are some benefits to this project — to reduce flood risk to some San Benito County communities, and to support fish migration in the tiny Pacheco Creek, for example — but those benefits don’t seem to have a lot to do with providing water supply. Here’s a slide that experts on the Valley Water agency staff presented to their Board in an April 2021 meeting:¹⁰

You read that right. The Pacheco project won’t address water shortages in prolonged droughts. Valley Water staff told their Board in April that one or two dry years would likely exhaust the water supply in the expanded Pacheco Reservoir.¹¹ Even worse, the project won’t provide any new water supply.

Why won’t Pacheco help with water supply? Apparently, for the same reasons why “Pacheco Creek’’ isn’t “Pacheco River.” The catchment area around the creek doesn’t collect much water. In fact, the stream is completely dry in the summer. Studies of the topography of the site reveal that the reservoir yields little rainwater from the local watershed — perhaps 6,000 to 9,000 acre-feet, “and that’s in a wet year,” according to one Valley Water expert.¹² Virtually all of that additional water would flow out from the dam to enable a constant stream flow of Pacheco Creek, to support the environmental benefits promised by the project’s proponents to assist with rearing and migration of juvenile steelhead trout. So, the collected rainfall is entirely, or nearly entirely, offset by stream outflow required to support fish.

The real water supply benefit of the project, Valley Water experts acknowledge, lies in providing much greater in-county capacity to store water it already has.¹³ That is, Valley Water has existing imported water supply contracts with districts elsewhere in the state, and the primary benefit of the Pacheco project lies in keeping that water in Santa Clara County, rather than contracting with another agency to store it elsewhere.¹⁴ Admittedly, the Pacheco project would offer fewer constraints to our rapid access of existing imported water supply, but there’s no new water.¹⁵

Two months later, Valley Water staff acknowledge that there are many cheaper ways to store imported water elsewhere at $400 to $600 per acre foot, rather than spending $18,800 per acre foot to build a new Pacheco Dam.¹⁶ By banking it in other counties, that water can be conveyed here as it’s needed, though with some annual quantitative limitations.

At the conclusion of this analysis, an important question remains: before we spend $1 of public money on a dam — let alone $2.5 billion — shouldn’t we know that it will provide us with more water?

3. Environmental Organizations Object to the Pacheco Project

While the Pacheco project’s advocates point to its environmental benefits — particularly the provision of constant flows in the Pacheco Creek to better support salmonids, and its potential support for wildlife refuges south of the Delta — it’s hardly a secret that environmentalists look at dams warily. Plenty has been written about the environmental harm wrought by dams, and by reservoir expansions.¹⁷ These familiar reasons — ranging from inundation of natural river habitats, to cost, to the destructive impacts of massive dam construction, among others — compel the Sierra Club and several other environmental advocates to oppose the Pacheco project.¹⁸

We won’t know fully about the project’s impacts until the completion of the Environmental Impact Report (EIR) at the end of this year, however, and it seems reasonable to refrain from jumping to conclusions until the conclusion of the EIR process. In the meantime, we’re spending money — public money. Before they ever see or approve an EIR, the Valley Water Board will have authorized and largely spent another $31 million on planning and pre-design work on it this year. Hence, the large rate increase.

The local environmental community does not reflexively oppose all reservoir expansions, though. For example, no significant environmental opposition has emerged to the expansion of the Los Vaqueros Reservoir¹⁹ in Contra Costa County, and it has fully cleared environmental review. We’ll next turn our attention to alternative water storage projects like Los Vaqueros.

4. We Have More Affordable, Sustainable, and Effective Options for Expanding Our Water Supply

We have far more affordable approaches to water storage — approaches that will actually increase our water supply — than the $2.5 billion Pacheco Dam. Alternatives include having Valley Water secure greater water supply rights by investing in another nearby reservoir expansion project, Los Vaqueros Reservoir in Contra Costa County, which costs less than half as much as Pacheco (on a cost per acre-foot basis). The expansion Los Vaqueros — already the Bay Area’s largest reservoir — appears far closer to getting under construction than Pacheco as well. Los Vaqueros has already completed its environmental review, it has a commitment of more than $460 million of California Proposition 1 funding, has no significant opposition from any environmental organization, and will secure its final permits this year. Valley Water can obtain a share of the additional supply and storage capacity by subscribing to a larger share of the project through an agreement with Contra Costa Water District, as the latter has urged.

Valley Water has other options as well — including much cheaper ways of storing water in remote groundwater storage banks — that the agency has used in the past to supplement water supply locally during dry years by using existing water conveyance systems.²⁰ The cost of remote storage runs at a steep discount to costly construction projects on a per-acre-foot basis. Of course, the Pacheco Dam makes many other projects look cheap by comparison, including other reservoir expansions at Sisk and Los Vaqueros. Here’s one comparison of water storage options prepared by Valley Water staff:²¹

Conclusion

Remarkably, Valley Water staff directly posed the question to their Board to force an assessment of whether the Pacheco project is really worth any additional public expenditure. In its April Board meeting, Valley Water staff queried the Board Members: “Does it make sense to continue to include the Pacheco Reservoir Expansion Project in the Water Supply Master Plan?”²² As the saying goes, if you have to ask….

[1]: Santa Clara Valley Water District (“Valley Water”), Protection and Augmentation of Water Supplies 2021 (“PAWS 2021”), p. 46 (see www.valleywater.org/sites/default/files/2021-03/2021-22%20Protection%20and%20Augmentation%20of%20Water%20Supplies%20Report.pdf.

[2]: Valley Water, PAWS 2021, p. 46.

[3]: Valley Water, PAWS 2021, p. 54.

[4]: Valley Water, Pacheco Reservoir Expansion Project Workshop, Staff Presentation at April 14, 2021 public Special Meeting (“April 14, 2021 Public Workshop”), slide 4. (Can be found at https://scvwd.legistar.com/Calendar.aspx)

[5]: Valley Water Staff Presentation, at April 14, 2021 Public Workshop, slide 6.

[6]: Paul Rogers, “$2.5 Billion Pacheco Dam Project Moves Forward Despite Cost Increase,” Mercury News, January 12, 2021, https://www.mercurynews.com/2021/01/12/2-5-billion-pacheco-dam-project-moves-forward-despite-cost-increase/

[7]: Valley Water Staff Presentation, at April 14, 2021 Public Workshop, slide 15.

[8]: Valley Water Staff Presentation, at April 14, 2021 Public Workshop, slide 13.

[9]: Valley Water Staff Presentation, at April 14, 2021 Public Workshop, slide 14.

[10]: Valley Water Staff Presentation, at April 14, 2021 Public Workshop, presentation of Deputy Operating Officer Christopher Hakes https://scvwd.granicus.com/MediaPlayer.php?view_id=3&clip_id=1899.

[11]: Valley Water Staff Presentation, at April 14, 2021 Public Workshop, see https://scvwd.granicus.com/MediaPlayer.php?view_id=3&clip_id=1899.

[12]: Valley Water Staff Presentation, at April 14, 2021 Public Workshop, presentation of Deputy Operating Officer Christopher Hakes https://scvwd.granicus.com/MediaPlayer.php?view_id=3&clip_id=1899.

[13]: Valley Water Staff Presentation, at April 14, 2021 Public Workshop, response of Senior Water Resources Specialist Samantha Greene, at 1:21–1:24 https://scvwd.granicus.com/MediaPlayer.php?view_id=3&clip_id=1899 .

[14]: There’s also plenty of question about when and whether the Pacheco Dam would be completed in time to provide much benefit when our communities really need it: while Anderson Dam remains out of commission. Obviously, water supply expansions prior to the completion of the Anderson Dam retrofit could provide tremendous value, because Anderson has become unusable — and drained to deadpool — to enable reconstruction of the dam. Pacheco can’t possibly be constructed in that period of time, however. In February of 2021, Valley Water published a timeline showing that it could complete Pacheco Reservoir by 2034, assuming a 2025 commencement of construction. (See https://www.valleywater.org/sites/default/files/02-22-2021%20Pacheco%20FAQ%20pre-scoping%20meeting.pdf)

[15]: Valley Water staff reported a seemingly contradictory completion date of 2030, but it relies on what staff admitted was a “very aggressive” timeline, that according to one draft document would require crews working 24 hours per day, 7 days per week.

[16]: Valley Water Staff Presentation, at April 14, 2021 Public Workshop, slide 11.

[17]: See, e.g., American Rivers, “How Dams Damage Rivers,” https://www.americanrivers.org/threats-solutions/restoring-damaged-rivers/how-dams-damage-rivers/; “The Downside of Dams,” Scientific American, https://www.scientificamerican.com/article/how-do-dams-hurt-rivers/; “Five Ways that Megadams Harm the Environment,” https://www.dw.com/en/five-ways-mega-dams-harm-the-environment/a-53916579 June 25, 2020; “Do Dams Destroy Rivers?” The Guardian, August 27, 2014, https://www.theguardian.com/environment/live/2014/aug/27/do-dams-destroy-rivers

[18]: Paul Rodgers, “Environment Report Out on New $1 Billion Dam for Santa Clara County,” Mercury News, August 10, 2019, https://www.mercurynews.com/2019/08/09/environment-report-out-on-new-1-billion-dam-proposed-for-santa-clara-county/

[19]: Paul Rodgers, “Major New Reservoir Planned in Santa Clara County,” Mercury News, September 11, 2018, https://www.montereyherald.com/2017/04/21/major-new-reservoir-planned-in-santa-clara-county/

[20]: See http://www.semitropic.com/GroundwaterBanking.htm.

[21]: Valley Water Staff Presentation, at April 14, 2021 Public Workshop, slide 11.

[22]: Valley Water Staff Presentation, at April 14, 2021 Public Workshop, slide 16.

Mayor of San José, California